Slightly more jobs and wages in the USA, but much more risk for the bond market

A characteristic of bubbles is that they create temporary bouts of panic, most of which are short-lived, until one day… Developments in recent days have led to concern that we might now be in that end phase: there is a risk of markets getting carried away, capable of derailing international markets that have been overly reliant on the huge amounts of liquidity lavished upon them by central banks in the last ten years.

Against that background, the January US jobs report had particular resonance. The news was not great. Job creation rose slightly to 200,000 in January from 160,000 in December but, more importantly, annual wage growth accelerated to 2.9%, its highest level since June 2009. As a result, the report has given further momentum to the correction in the US bond market.

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